I’m an author, journalist and one of the UK’s social media pioneers. Here I write about publishing, self-publishing and crowdfunding.
I am also the author of Argleton, a novelette about a mysterious town that appears on digital maps but doesn’t exist in reality. I self-published via Kickstarter and Amazon Kindle, and am negotiating my way through the publishing world and exploring new business models for entrepreneurial authors along the way.
As a freelance journalist, I have written about social media and technology for FirstPost.com, The Guardian, CIO Magazine and Computer Weekly.

Amazon Is Ripe For Disruption

Amazon, the great disintermediator that put a spanner — in fact, a set of 25 spanners in a handy case, yours for just $9.99 — in the businesses of many a retailer, is going to face exactly the same fate if it doesn’t start to address its weaknesses soon, particularly in the area of publishing. In an article looking at trends for 2013, I told the The Guardian’s Jemima Kiss:

“Amazon is ripe for disintermediation itself, having done that to bookstores, publishers and distributors, so some plucky publishing startups will start to push Amazon to the sidelines,” says Charman-Anderson. “As soon as consumers feel they have a sensible choice, they will go for it.”

I was challenged on Twitter to support this view, so here we go.

Amazon has created its dominant position by providing customers with what they want: (almost) any book, at a ridiculously low price, delivered rapidly. The deep discounting that Amazon is able to support attracts buyers who sense a bargain and is often quoted as the reason, along with the Kindle, that it dominates the book e-tailing market. However Amazon has problems and they are not trivial.

Amazon’s reviews system is fundamentally broken and whilst that might seem like an issue that troubles only those of us in the industry who pay attention to these things, it isn’t. As book reviews become more and more unreliable, so more and more buyers will start to get frustrated that they aren’t getting what they were expected and will start looking for reviews elsewhere. That will habituate them to looking outside Amazon for information on books and bring Amazon’s position as the canonical reference for books under threat.

JK Rowling Image credit: Getty Images via @daylife

Google Books is a great resource and makes it very easy for readers to sample a vast number of books before making a purchase decision. Google also provides links to a variety of retailers as well as helping people find book in libraries or local bookshops. As a destination for people who want to link to a generic book page, Google Books is actually more helpful than an Amazon page.

For book bloggers who want to earn a bit on the side from affiliate sales, Amazon isn’t the only option, so there is no advantage for them to link to Amazon alone. Better to link to all retailers with affiliate links so that your readers can buy from wherever they choose and you get a kickback regardless of their preferences.

Amazon may still be at the top of the tree in terms of market share, but it’s there because people are in the habit of linking to and going to Amazon, not because of any inherent advantage in doing so. That habit is being eroded, slowly but surely.

JK Rowling’s Pottermore, for example, is chipping away at Amazon’s position, not because it directly competes but because it proves to people that Amazon is not the only game in town. Want to buy a JK Rowling book? Pottermore is the place to go. What happens when more big name authors decide that they want what JK Rowling’s got? Especially as what she’s got isn’t just her own site and infrastructure, it’s her customers’ data.

Anyone who understands the importance of data understands how badly Amazon fails publishers. Want to know how someone found your book on Amazon? Not a hope. Want to know if your Twitter promo campaign is working? No chance. Want to know where your buyers are? You’ll never find out. Data is gold. Amazon provides iron pyrites. How long are publishers going to carry on sacrificing data on the alter of Amazon’s reach?

Indeed, Amazon actually prevents self- and traditional publishers from innovating. If they want to bundle an ebook with the paperback, they can’t do that through Amazon. If they want to provide extras, cross-sell, up-sell, or invite buyers onto their mailing list, they can’t do that through Amazon. If they want to forge a direct relationship with their customers or create a community they have to move away from their reliance on Amazon. It is simply impossible to innovate at the point of sale if you do not control it.

Can Amazon be sure to maintain its dominant position purely through its catalogue, reach and discount? Is that really enough for keep it secure?

My feeling is that no, in the long term that is not enough. Whilst I don’t anticipate any sort of overnight coup d’état, there are start-ups with the potential to nibble away at Amazon’s dominance over the next 12 months.

Publit is one, and I wrote about them the other week. What they offer is not only distribution to the main retailers but also the opportunity to run your own web shop. That means data and the potential to do all that retail innovation that Amazon prevents. For publishers, self- and traditional, that’s a fantastic opportunity.

Think about this: These days, authors have to do a lot of their own promotional work. Contrary to popular belief, just chucking a book on Amazon doesn’t mean that it’s going to get found and bought. And that’s especially true for new entrants with no reviews, no or low sales, and a price below £2.49. You have to promote, and promote hard. Doesn’t matter if you’re self-published or an author with a traditional publishing house, at some point you have to reach out to your audience and say, “Here is where to buy my stuff”.

That means you can choose where to send them. Will you link to Amazon, where your sale goes into a data black hole, or will you send them to your own webshop, or your publisher’s, where that information can be captured and you can provide a few little extras to keep your readers sweet?

A good example of the choice that publishers need to make is the one that the Financial Times newspaper made. The FT decided that their iOS app data and their relationships with their readers was so valuable to them that they were not willing to let Apple get in their way. Better to lose a few subscriptions but gain data and flexibility.

Book publishers need to think about that, although with start-ups like Publit, it’s not actually an either/or decision, because you can both sell through Amazon, retaining scale, and sell through your own shop, retaining data. You can choose what to promote and if your own shop turns out to be more valuable in the long term, then you can decide to ditch Amazon if you want to.

If the big publishers decided to be more flexible around even just ebooks, there’s every possibility that over the next few years such tactics could seriously erode Amazon’s position. It’s not agency pricing the publishers need, it’s the balls to play a long game.

Whenever there’s a huge, established player dominating a market, there will always be little companies snapping at its heels, but frequently they never manage to take a significant bite. But there’s more than that going on in this case. Amazon has lost sight of how the market is changing and treats both its suppliers and its customers with disdain, which opens the door to new players who can and do provide what Amazon could but won’t.

Amazon now risks exactly the same disintermediation that it perpetrated a decade ago. It won’t happen overnight, but there’s every possibility that all these factors, and more, will come together to change the publishing landscape once again. Question is, how fast is that change going to happen?

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Readers have to demand device-independent standards before anyone can take down Amazon. Right now, “Manage my Kindle” is a market-driven, easy-to-use, feature-rich platform that syncs one book on any Amazon device I pick up. Free enterprise says they won’t share that system with anyone else. Others will have to crack the code and make something that works with Amazon’s devices or sit back and watch the market leader continue to dominate.

Device-independent standards would be nice, but I don’t think they are a prerequisite for damage to Amazon’s position at the top to occur. Anyone can create and provide a Kindle-compatible ebook without going through Amazon’s Kindle store. Although Amazon is trying to create lock-in by providing a smooth end-to-end service, they are ultimately selling their Kindles at cost or at a loss in order to dominate the content market. That makes them vulnerable to disintermediation on content, which could then affect their Kindle hardware strategy.

This article was a nice try. I’d love to see some new players, particularly since B&N seems to be getting less relevant, not more, but unfortunately I think these arguments miss the mark in several places.

> For book bloggers who want to earn a bit on the side from affiliate sales, Amazon isn’t the only option, so there is no advantage for them to link to Amazon alone.

The other affiliate programs are harder to join, harder to use, and pay less… not that they have less royalty necessarily, but given an array of choices, so many more people will select Amazon that the Amazon paycheck for an affiliate (or even an author) is often orders of magnitude larger. Furthermore, the most important thing is for a blogger to be relevant and useful to its audience (otherwise there will be no paycheck at all). This means a link to Amazon is mandatory, since most readers in the online community have Kindles.

> What happens when more big name authors decide that they want what JK Rowling’s got?

JK Rowling wasn’t just a big name, she was one of the biggest, and therefore not a reasonable model for everyone else. If the top three authors decide to make their own shops, Amazon will have to buy generic brand toilet paper for a month, but it isn’t going to decimate them. A regular old bestselling author cannot afford to move away from Amazon, and this isn’t just about reach, at least not precisely. It’s about lists. A bestselling author that gets onto the Amazon list will stay on the list, at least for a while. Over on their own website, they only get the people who were going there anyway. They get their fans and nothing more. That’s great if you can subside on that, but most bestsellers still need discovery.

> Will you link to Amazon, where your sale goes into a data black hole, or will you send them to your own webshop, or your publisher’s, where that information can be captured and you can provide a few little extras to keep your readers sweet?

I will link to Amazon because I know that’s where most of my readers buy from, and my number 1 goal is to make that sale. If I link them over to Google Books (and the average non-publishing Joe doesn’t even know wth that is) then they’re just going to click away. Sale lost. No way am I doing that as an author.

Yes, I do have the option to use other distributors, and I do use them. The differential is embarrassing. We’re talking 1 sale for every 500 on Amazon. Not even worth the time it takes me to manage the payment aspect, but I continue to do it for the sake of reach.

> That will habituate them to looking outside Amazon for information on books and bring Amazon’s position as the canonical reference for books under threat.

I think this is the best point in the group. Amazon’s review system and review collection is poor… compared to Goodreads. But only Goodreads. Which is why they should have bought them, but after their falling out, I guess that isn’t happening anytime soon. However, B&N’s reviews are even worse! People have chats in the comments and B&N won’t even delete them (for confirmation, speak to plenty of popular self-published authors who pull their hair out over this). Smashwords, who SHOULD be a competitor in this area for self-published books, is not, because they require you to purchase from them to leave a review. Amazon has some work to do on their review system (and they have recently made it worse with random deletions and arbitrary rules) but it is far from the worst option out there. Their only competition in this area right now is Goodreads and all they have to do is shell out the cash to buy them and problem solved.

Skye, thank you for such a long, thoughtful reply. I’ll do my best to respond.

> For book bloggers who want to earn a bit on the side from affiliate sales, Amazon isn’t the only option, so there is no advantage for them to link to Amazon alone.

The other affiliate programs are harder to join, harder to use, and pay less… not that they have less royalty necessarily, but given an array of choices, so many more people will select Amazon that the Amazon paycheck for an affiliate (or even an author) is often orders of magnitude larger. Furthermore, the most important thing is for a blogger to be relevant and useful to its audience (otherwise there will be no paycheck at all). This means a link to Amazon is mandatory, since most readers in the online community have Kindles.

Yes, Amazon’s affiliate program is currently better than the others, but they exist and although Amazon is in top spot there’s no guarantee that they’ll stay there. It’s smart to provide links to all retailers if one can, because that gives readers choice, and then one would be ready if the other retailers ever get their act together. I’m not saying this is an “either/or” situation, but an “and”.

As for your statement that most readers in the online community have Kindles, I’d like to see evidence of the ereaders split across different demographics, including heavy buyers and those engaged online, and US vs other countries. For example, in Canada, Kobo has 46 percent of the ereader market (as at Jan 2012), and Amazon only 24 percent. In the US, Amazon Kindle stands at 48 percent, Pandigital readers at 18.6 percent, Nook at 16.9 percent and Sony at 9.4 percent (source).

So there’s a fair amount of variability, and a lot of scope for rapid change. There’s just no way that we can assume that Amazon is dominant in every market and going to stay that way. The next two years will see the ereader market change, and may even see them lose a lot of ground to tablets, in which case it will be the ebook reading apps that become important, not the ereaders themselves.

> What happens when more big name authors decide that they want what JK Rowling’s got?

JK Rowling wasn’t just a big name, she was one of the biggest, and therefore not a reasonable model for everyone else. If the top three authors decide to make their own shops, Amazon will have to buy generic brand toilet paper for a month, but it isn’t going to decimate them. A regular old bestselling author cannot afford to move away from Amazon, and this isn’t just about reach, at least not precisely. It’s about lists. A bestselling author that gets onto the Amazon list will stay on the list, at least for a while. Over on their own website, they only get the people who were going there anyway. They get their fans and nothing more. That’s great if you can subside on that, but most bestsellers still need discovery.

JK Rowling is certainly at the top of the long tail, but she’s not alone up there and her situation is not unique. Danielle Steel, for example, is the bestselling author alive, and has sold almost twice as many books as Rowling has. Jackie Collins sold nearly as many as Rowling. Dean Koontz, Stephen King, Nora Roberts… Just a handful of best selling authors who could quite easily do what JK Rowling has done, if they and their publishers wanted to.

And there are a whole bunch of smaller-but-still-significant authors like Terry Pratchett and Neil Gaiman whose fans would almost certainly be attracted by an author site that sold direct. In fact, for my money, it’s these authors who, if they (and by ‘they’ I mean ‘their publishers’) started running their own retail operation, could do most damage to Amazon because these are the authors with the most loyal fans. These are the authors who are actually most similar to Rowling, not in what they write but in their cohesive and loyal fanbase.

But of course, JK Rowling hasn’t completely left Amazon, and nor does she have to. She can both exist within Amazon, and run her own shop and community and get the best of both worlds. But every purchase made directly through her site is one less through Amazon, and with enough authors doing that, it would certainly hurt Amazon’s bottom line beyond the toilet paper.

At the other end of the graph, the authors who have little or no presence would actually be better served by controlling their own sales and data than relying on Amazon. Again, that doesn’t mean eschewing Amazon, but that you run your own shop in parallel and as your profile builds, you encourage your fans to buy direct from you rather than from Amazon. Fans will do that, particularly if they think that more of their money goes into your pocket.

So, let’s say self-published authors start running their own shops, and fans get used to buying direct, what happens then if an author takes off? Suddenly, all that reliance on Amazon is gone. Amazon may still get some of the sales, but their control of the sales channel is over.

Well, the point of running your own shop, instead of or in parallel to the major retailers is that you’re not completely dependent on them and you can get data. Most likely, this will be data on your most loyal fans, as they’ll be the ones most likely to buy direct. And that just happens to be the most important data, because it’s your loyal fans who are interested in any extras you can sell to them.

> Will you link to Amazon, where your sale goes into a data black hole, or will you send them to your own webshop, or your publisher’s, where that information can be captured and you can provide a few little extras to keep your readers sweet?

I will link to Amazon because I know that’s where most of my readers buy from, and my number 1 goal is to make that sale. If I link them over to Google Books (and the average non-publishing Joe doesn’t even know wth that is) then they’re just going to click away. Sale lost. No way am I doing that as an author.

I’m not suggesting that you send them to Google instead of Amazon, but Google as well as Amazon, and as well as the other retailers and your own site (if you had one). There’s absolutely no reason to think that providing a choice of sales outlets would result in a lost sale.

Yes, I do have the option to use other distributors, and I do use them. The differential is embarrassing. We’re talking 1 sale for every 500 on Amazon. Not even worth the time it takes me to manage the payment aspect, but I continue to do it for the sake of reach.

That’s now. How’s it going to be in a year or two years? This is a very fluid market.

> That will habituate them to looking outside Amazon for information on books and bring Amazon’s position as the canonical reference for books under threat.

I think this is the best point in the group. Amazon’s review system and review collection is poor… compared to Goodreads. But only Goodreads. Which is why they should have bought them, but after their falling out, I guess that isn’t happening anytime soon. However, B&N’s reviews are even worse! People have chats in the comments and B&N won’t even delete them (for confirmation, speak to plenty of popular self-published authors who pull their hair out over this). Smashwords, who SHOULD be a competitor in this area for self-published books, is not, because they require you to purchase from them to leave a review. Amazon has some work to do on their review system (and they have recently made it worse with random deletions and arbitrary rules) but it is far from the worst option out there. Their only competition in this area right now is Goodreads and all they have to do is shell out the cash to buy them and problem solved.

Goodreads is better than Amazon but definitely has room for significant improvement. Just have a look at the discussions of Goodreads bullying on various blogs etc — if only a fraction of that stuff is true, it’s a problem that needs fixing. The truth about reviews is that they are a ‘wicked’ problem, and attempts to fix one part of the problem often result in unforeseen complications. It’s something I’ve been thinking about a lot, and will be blogging about in the New Year, if I can come up with some sensible conclusions!

As it relates to the J.K. Rowling issue…it is my understanding that a very small percentage of authors (the grisham’s, clancy’s, rowlings, dan browns, etc.) make up an overwhelmingly large percentage of book sales.

I can’t seem to find reliable recent data on this, but if true it supports your point that a relatively small percentage of authors following J.K. Rowling would actually have the potential to disrupt amazon.

Do you know if the data actually supports this and where the best data can be found?

Pottermore is not a good example of Amazon’s weaknesses. The HP ebooks enjoyed special advantages which almost no other series cal claim. They were in high demand, unavailable anywhere, and the author had enough money and power that Pottermore controlled the negotiations.

Pottermore could have walked away from the negotiating table because Amazon wanted HP ebooks more than Pottermore needed Amazon. There are perhaps a handful of authors and publishers where that is true. http://www.the-digital-reader.com/2012/05/26/pottermore-is-an-experiment-which-probably-cannot-be-replicated/

Actually, Pottermore is a great example, so long as you don’t get distracted by the rather unusual deal struck where Amazon pushes people over to Pottermore instead of selling ebooks directly. Setting up your own shop is not dependent on pulling out of Amazon, or getting Amazon by the short and curlies so that you can get them to do your sales for you in exchange for a kickback, which is probably what happens with Pottermore.

JK Rowling had two important things going for her: She had popular books and loyal fans. She is far from being alone in that. Any author with those two things can set up their own ebookstore at the very least and leech sales from Amazon by forming direct relationships with their readers. You don’t need to strike special deals with Amazon, though if you have the heft to, it’s worth considering.

Finally, if more publishers did something akin to Pottermore, it would have a positive effect on the ebook market overall, in my opinion. It would provide the opportunity for innovation, which is sorely needed, would decrease Amazon’s stranglehold, and ultimately give customers more choice about where and how to spend their money. It wouldn’t be balkanisation, it would be a flourishing and competitive marketplace.

I’m not so sure everyone in publishing thinks indie ebookstores is such a great idea, or rather there’s not enough money in it.

Take Baen Books, for example. This SF publisher has had their own ebookstore since 2000. They were in fact an ebook pioneer and they just started selling their ebooks in the Kindle Store.

Here’s the fun part: they have apparently been trying to get into the Kindle Store since before it launched. They just couldn’t come to an agreement with Amazon.

Baen has a number of mid-list authors who have sizable followings. They would seem to be the type which would you think would do well as an indie, but Baen is still going for the Kindle Store.

I think it’s the money, in that not being where the customers are was deemed a bad thing. Any indie author who does go it alone will likely also see fewer sales, whether from readers not finding the store or not wanting to set up yet another account at yet another ebookstore.

Any publisher right now has to explore all retail options, including Amazon. I’m not doubting or contradicting that at all. Baen has to do best by its authors, and at the moment being in the Kindles store is important to increase reach and sales. But the fact that Baen want to get their ebooks into Amazon doesn’t undermine the broader point that running your own webshop is an opportunity to develop a community and gather valuable data from your readers. I don’t see any signs that they are shutting their webshop down, so it’s a bit of an assumption to say that they think it’s not a great idea or that there’s not enough money in it. Baen knows if it’s economically viable but I certainly don’t have any evidence either way. That they want to expand their reach and sales says nothing about the success of their current approaches.

But the thing is, the web is an opportunity, not a shoo-in. When it comes to websites, execution is everything and having a quick look at Baen’s, it’s quite lo-fi, confusing for the first-time or casual buyer and from a user standpoint, rather suboptimal. Although I recognise that they are well known for their independence and innovation, there’s a lot they could do to improve the user experience.

Obviously publishers and authors need to be where the money is now. But that doesn’t mean that the money is going to stay in the same place, or that there’s not an opportunity for disintermediation and thence innovation. It’s that kind of reliance on the status quo staying put that got the publishing industry in this mess in the first place. What we need is a bit of experimentation, a bit of risk-taking, a bit of innovation, and for that to happen publisher must look outside of Amazon.